Power defined by connected PCs

Three years ago I visited Microsoft to ask its top managers these basic questions: How does Microsoft measure power, and which countries have it and which ones don't? They answered that Microsoft measured power by one ratio: personal computers per household. And on Microsoft's power map South Korea ranked highest in the world, with the United States and Japan also near the top; Europe was all on the rise, except for France; but the Middle East, save for Israel, was a black hole.

Well, last week I went to Silicon Valley to ask the same questions to the cutting-edge technology companies there, and I got a very different answer from three years ago. Silicon Valley measures power today not in PCs per household, but in networks per capita. That is, how broadly and deeply has a country taken its PCs and linked them together into networks within companies, schools and entertainment sources, and then tied them into the Internet and the World Wide Web? And how broad is its bandwidth, which is the capacity of cable, telephone lines and fiber optics to carry digital communications from point to point in networks? "Bandwidth" and "degree of connectivity" - those are the new measures of power in the Silicon Universe."What people have not grasped is that the Internet will change everything," says John Chambers, the dynamic president of Cisco Systems - the most important American company that no one has ever heard of. It makes the black boxes that connect the Internet around the world.

"The Internet will change how people live, work, play and learn. The Industrial Revolution brought together people with machines in factories, and the Internet revolution will bring together people with knowledge and information in virtual companies. And it will have every bit as much impact on society as the Industrial Revolution. It will promote globalization at an incredible pace. But instead of happening over 100 years, like the Industrial Revolution, it will happen over 7 years."

A few caveats: Chambers has an obvious self-interest in promoting this world view. The Internet revolution will take more than seven years. And bandwidth is a huge problem, because until the digital pipes get bigger and more organized, networking will be constrained. All that aside, Chambers is still right: Jobs and economic power will gravitate to those societies with the most networks and bandwidth, because those countries will find it easiest to gather, tap and deploy knowledge in order to design, invent, manufacture, communicate, educate and entertain.

Beyond bandwidth and connectivity, three other factors will distinguish companies and countries. One is whether you have a business culture where your people are comfortable exploiting networks and sharing their knowledge. I know a management consultant who likes to say about the German electronics giant Siemens: "If Siemens only knew what Siemens knows it would be a rich company." The second is whether you have a competitive culture in which big companies have to either constantly reinvent themselves or be overtaken by startup companies, which is the essence of Silicon Valley. And the third factor is whether your company is good at creating strategic partnerships. You cannot compete today on a large scale without going global, and you can't go global without partners - the markets are simply too big and complex, and the level of investment too great.

"No one can do it by themselves anymore," argues Chambers. "The companies who do not understand how to truly partner will get left behind."

So who's hot and who's not in today's world? Taiwan is feared in Silicon Valley for its innovative prowess, connectivity and dynamic capitalist business culture that exploits all this technology. The United States, Britain, Canada, Australia and parts of Israel and India also fall into this category, with China rising. Scandinavia, particularly Finland, scores very high on total networking, but lacks the entrepreneurial culture to fully exploit it. Japan and Korea are falling behind in network investments. Germany is catching up and France has just woken up.